Good…Not Great: May 31 – June 4

Hiring gained momentum in May but still has a long way to go. Here are the five things we learned from U.S. economic data released during the week ending June 4.


Hiring accelerated in May, but many jobs remain open. Nonfarm employers expanded payrolls by a seasonally adjusted 559,000 during the month, per the Bureau of Labor Statistics. While up from 278,000 in April, the pace of hiring was under March’s 785,000 added jobs. Private sector payrolls swelled by 492,000, with all but 3,000 of the gain going to the service sector. Industries adding the most jobs in May were leisure/hospitality (+292,000), education/health services (+87,000), and professional/business services (+35,000). Governments added 67,000 workers, with state (+45,000) and local (+33,000) government payrolls both expanding. Nonfarm payrolls remained 7.629 million smaller than that of their February 2020 peak.

The good news is that a separate household survey has the unemployment rate falling to a pandemic low of 5.8 percent. The bad news is that the labor force contracted by 53,000 in May, with the labor force participation rate holding steady at 61.6 percent (February 2020: 63.3 percent). The same rate for adults aged 25-54 remained at 81.3 percent, 1.6 percentage points below its February 2020 mark. 5.271 million people held a part-time job but desired a full-time opportunity (up 28,000 for the month but half of that from a year earlier). The median length of unemployment fell by a half week to 19.3 weeks, but 40.9 percent of unemployed people have been without a job for at least 27 weeks. Also dropping to a pandemic-low is the U-6 measure (which is the BLS’s broadest measure of labor underutilization), as its lost 2/10ths of a point to 10.2 percent. The U-6 was at 7.0 percent in February 2020 and had peaked two months later at 22.9 percent.

Factory orders failed to rise for the first time in a year. The Census Bureau estimates new orders for manufactured goods declined 0.6 percent in April to a seasonally adjusted $485.2 billion. Even with the drop, factory orders over the first four months of 2021 were up 14.2 percent from the comparable 2020 months. Orders for transportation goods fell 6.6 percent, hurt by drops for motor vehicles, ships/boats, and defense aircraft. Net of transportation goods, core factory orders grew 0.5 percent. A proxy for business investment—civilian nonaircraft capital goods orders—increased 2.2 percent in April. Shipments increased for the 11th time in 12 months (+0.4 percent), with both unfilled orders (+0.2 percent) and inventories (+0.3 percent) also experiencing gains.

Purchasing managers report increasing business activity in both manufacturing… The ISM, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, added a half-point in May. With a reading of 61.2, the PMI was above 50.0 for a 12th consecutive month, indicative of an expanding manufacturing sector. Among PMI components, readings rose for new orders and inventories but fell for production and employment. Sixteen of 18 manufacturing industries grew in May, led by furniture, nonmetallic mineral products, and plastics/rubber products. The press release notes that many companies “continue to struggle to respond to strong demand due to the difficulty in hiring and retaining direct labor.”

…and the service sector. The Services PMI, also from the Institute for Supply Management, added 1.3 points in May to a reading of 64.0 (also its 12 month over 50.0). Measures for business activity/production, new orders, and inventories all rose, but the employment indicator pulled back. All 18 tracked service sector industries reported growing during the month, led by retail, wholesale trade, and construction. Similar to the manufacturing report, the press release noted, “some capacity constraints, material shortages, weather-related delays, and challenges in logistics and employment resources continue.”

Housing drove construction spending in April. The Census Bureau reports that the annualized value of new construction put in place grew 0.2 percent during the month to a seasonally adjusted $1.524 trillion. Spending was 9.8 percent ahead of its year-ago pace. Private-sector spending grew 0.4 percent to $1.181 trillion (+13.9 percent versus April 2020), including a 1.0 percent jump for the residential sector. New single-family home construction spending rose 1.3 percent, while that for multi-family homes gained 1.9 percent. Private-sector nonresidential spending dropped by a half percentage point. The 12-month comparables for the two were +39.6 percent and +27.1 percent, respectively. Public sector construction expenditures slowed 0.6 percent in April to $343.5 billion, down 2.2 percent from a year earlier.

Other U.S. economic data released over the past week:

  • Jobless Claims (Week ending May 29, First-Time Claims, seasonally adjusted): 385,000, -20,000 vs. the previous week, -1,220,000 vs. the same week a year earlier). 4-week moving average: 428,000 (-78.5% vs. the same week a year earlier).
  • Vehicle Sales (May 2021, Automobiles and Light Trucks, seasonally adjusted annualized rate): 17.0 million (vs. April 2021: 18.8 million, May 2020: 16.9 million).
  • Productivity (2021Q1-revised, Nonfarm Business, seasonally adjusted annualized rate): +5.4% vs. 2020Q4, +4.1% vs. 2020Q1.
  • Beige Book

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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